Business Taxes in New York

Does the state tax my business income, and where?

New York taxes individual income on a graduated schedule, so pass-through income from a sole proprietorship, partnership, S-corporation, or LLC is taxed to the owner at the state level. C-corporations pay the New York corporate franchise tax on income apportioned to the state.

The complication in New York is the city layer, above all New York City. City residents face a separate New York City personal income tax on top of the state tax, and New York City also imposes an unincorporated business tax on the net income of partnerships, sole proprietorships, and similar entities operating in the city, which is a tax many owners do not know exists until they encounter it. The result is that a city-based owner can face state income tax, city personal income tax, and, depending on structure, the unincorporated business tax on the same enterprise. Where you live and where the business operates both drive which of these apply.

Is a pass-through entity tax election available, and when is the deadline?

New York offers a pass-through entity tax election that lets a partnership or S-corporation pay New York tax at the entity level, preserving a federal deduction the owner-level cap would otherwise limit and passing a credit to the owners. New York City has its own separate pass-through entity tax election as well, so a city-based business may need to make two elections, each with its own annual deadline and estimated payment rules. The election deadlines are firm and generally fall earlier than owners expect, and the state and city elections do not happen automatically or together. Missing either date, or assuming one election covers both, forfeits the benefit for that level for the year, so both must be calendared and paid on their own schedules.

When does an out-of-state seller owe sales tax here?

An out-of-state seller can owe New York sales or use tax without a physical presence in the state. Under the economic nexus standard that followed Wayfair, a remote seller whose sales into New York exceed the state's threshold over the measurement period must register and collect on taxable sales to New York customers. Physical presence such as employees, inventory, or a location still creates nexus. Marketplace facilitators generally collect on behalf of sellers on their platforms, which shifts the remittance duty. Because New York City sales tax is administered together with the state tax, a seller collecting for New York destinations is collecting the combined amount rather than a separate city filing.

What deadlines differ from the federal calendar?

New York's calendar diverges from the federal one in several places, and the pass-through entity tax is the sharpest example: the state election, and separately the New York City election, each have their own annual deadline and their own estimated payment dates, several of which fall earlier in the year than the federal return. Entities also have New York filing and, for LLCs, publication and biennial statement obligations that keep them in good standing independent of income tax dates. State corporate franchise tax and New York City business tax returns and estimated payments run on their own schedules. Sales tax is filed on a recurring state cycle. An owner watching only federal dates will miss the earliest state and city election deadlines.

What do owners in this state most often get wrong?

The characteristic New York mistake is treating the state and the city as one system. Owners make the New York State pass-through entity tax election and assume it also covers New York City, or they miss the New York City unincorporated business tax entirely because they have never heard of it. Two elections, two deadlines, and two sets of estimated payments mean there are more dates to miss, and city-based owners miss them most. Nonresidents who work in the city and residents who work outside it also mishandle how income is sourced between state and city. The layering, not the rates, is what produces the errors here.